Consulting industry of Asia and Australia grows 6% to $50 billion

26 September 2018 Authored by Consultancy.uk

The consulting industry of the Asia Pacific, consisting of Asia, Australasia and a number of other very small markets, is expected to grow by 6% in 2018 to hit a market value of $50 billion. The market has seen consistent growth of more than 6% since 2015, but while this has primarily been driven by the growing economic clout of China and India, the largest consulting markets in the region remain Japan and South Korea.

North America – the United States and Canada – is by a distance the largest region for consulting firms, making up for around 55% of the globe’s $277 billion industry, followed by Europe, according to analysis by Consultancy.asia based on data sourced from ALM. When it comes to growth however, then it is Asia Pacific which is at the forefront of the industry. With a market size of $47 billion last year, Asia Pacific accounts for around 17% of the globe’s management consulting industry, and that figure is set to rise fast.

The Asia Pacific region covers a large and diverse portion of the world, spanning two continents and a myriad of geographical conditions and cultures. It encompasses East, South and South East Asia – including India, China and a host of other booming markets – and Oceania, which is most notable for hosting Australia and New Zealand, but also including a myriad of Pacific island nations across the Melanesia, Micronesia and Polynesia micro-regions.

Lifted by rapidly growing economies such as China – which saw expansion of 12% in 2017 – Hong Kong and Singapore, Asia Pacific has improved consistently since 2015 by between 6% and 7% each year. While the average is not markedly higher than North America or some of Europe’s more mature consultancy industries, it represents an average of Asia Pacific, a region which includes 58 territories – some of them incredibly small. Beyond the average within the data set, there are clear countries and regions that are steaming ahead of the rest.

Size of the Asia Pacific management consulting market ($ / billion)

Southern Asia, which consists of India, Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan, the Maldives and British Indian Ocean Territory, grew by 30% between 2015 and 2017. This was pushed forward largely by India, where controversial Prime Minister Modi’s pro-business policies driving up demand for management consultants. While the Government makes efforts to eliminate wasteful activity in the public sector and government-run enterprises, large Indian companies as well as multinationals have been quick to respond to these changes by accelerating digitisation efforts, to the benefit of both IT and digital consultants alike. At the same time, neighbouring Pakistan is enjoying increased trade with China, made possible by recent efforts between the two countries to create a maritime Silk Road.

Elsewhere, Southeast Asia’s management consulting scene is also booming. Spanning countries such as Indonesia and Vietnam, the region enjoyed 25% growth between 2015 and 2017. At the same time, in Indonesia, low internet penetration rates and subpar bandwidth quality has finally prompted the Government to pledge more money to IT infrastructure investments. Alongside a coming boom in digital, which will be supplemented by this, the country is also expected to witness a bump in HR advisory spend due to the rollout of new Sharia compliant retirement investment plans.

By far the hottest consulting market in the region at present is Vietnam, however, where the conservative government has defied all expectations by committing itself to a far-reaching reform agenda. The mixed economy is seeing a diversity of reforms, from labour law shifts to the rate of corporate tax being slashed, while several textile and footwear factories were established with state backing. Basic manufacturing companies, who no longer consider China cheap, are subsequently being drawn to Vietnam by these reforms, increasing advisory demand across all service lines as multinationals look to take advantages of the lighter regulations.

The consulting market of China and Mongolia expanded by 24% in the two years studied, and for 2018 and 2019, 11% growth per annum is forecasted. Despite management consulting only being introduced from Western countries to China in the 1980s, as part of the nation’s sweeping marketisation, China’s consulting market has continuously outpaced its economy. Last year this saw it growing at a double digit rate to reach a total market value of $4.5 billion. The Chinese consulting industry is now larger than its international equivalents in France and Australia, according to estimates from Source Global Research.

Management consulting market of Asia Pacific – by region

In Greater China, most mature consulting markets are Taiwan and the special administrative regions of Hong Kong and Macao, while mainland China still has long way to go but rapidly developing consulting market. Hong Kong and Macao are both largely focused on their financial services industries. Singapore’s heavily financial services dependent consulting sector is similarly booming on the back of its position as a key finance hub in the region, helped out by a buoyant cryptocurrency scene.

Mongolia’s management consulting market is highly dependent on mining and natural resources sector. The rightward political shift of several governments in North America and EMEA will prompt natural resource firms to examine the implications for renewable technology mandates. Rare earth minerals are critical inputs to these technologies and the weakening of mandates by new administrations can result in a significant curtail in demand. These companies are expected to hire consultants to conduct operational improvements and corporate strategy to better navigate the uncertain regulatory climate.

Despite all this rapid change, Japan and South Korea remain the largest consulting market across Asia Pacific. The pair grew by 6% in the past two years, the average rate of the combined market, of which they constitute 44%. In Japan and Korea the consulting market remains largely centred on IT and operations work. In South Korea, the struggling shipping market means restructuring is high on agenda in the maritime sector particular, while relations with North Korea warm, potentially offering up a long-term boost of cross-border employment. In Japan, meanwhile, the economy is in a phase of sustained economic expansion despite deepening labour shortages and the threat of a global trade war. With these factors on the horizon, however, companies are seizing on their economic momentum to prepare for trouble ahead, by engaging consultants.

Further south in Australasia, Australian consulting continues to be largely dependent on the country's natural resources and power industry, which accounts for close to half of its total consulting market urgency felt by natural resource firms to restructure is expected to boost demand for crisis and recovery and post-integration consulting work. While it continues to grow, at the same time, public sector consulting may come up against significant headwinds moving forward. With vociferous business advocate Malcolm Turnbull having been ousted as the country’s Prime Minister earlier in 2018, significant public scorn has been poured over the Australian Government’s consulting spending, and with an increasingly unstable coalition currently ruling the nation’s Parliament, justifying this could become far less easy.

For more information on the developments in Asia Pacific’s management consulting industry, read the article 'Asia Pacific consulting industry breaks $50 billion barrier' on Consultancy.uk’s regional sister platform, Consultancy.asia.

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